<PAGE>
G.T. GREATER EUROPE FUND
50 California Street
27th Floor
San Francisco, CA 94111
DEAR SHAREHOLDER:
Attached are proxy materials for a Special Meeting of
Shareholders of G.T. Greater Europe Fund (the "Fund") to be held on
December 13, 1995. We urge you to read them carefully. You are being
asked to consider important proposals that will have a material effect on
the future of the Fund.
Your Board of Trustees recognizes that many Fund shareholders are
concerned over the discount from net asset value at which the Fund's
shares have historically traded on the New York Stock Exchange, and over
their resulting inability to obtain net asset value for their shares in
the secondary market. Over the past several months, the Board has been
evaluating alternatives for increasing shareholder value and preserving
the Fund as an attractive investment for its long-term shareholders. As a
result, the Board is now submitting to shareholders a proposal to
restructure the Fund ("Restructuring Proposal").
The Restructuring Proposal seeks to address shareholder concerns
over the discount, and to maintain the Fund for its long-term shareholders
as a more liquid investment vehicle with a more narrowly focused
investment mandate. Under the Restructuring Proposal, the Fund (1) would
change its name to "G.T. Global Eastern Europe Fund," so as to reflect a
refocusing of its investment mandate on Eastern Europe, and (2) would
convert to "interval fund" status, so as to provide shareholders with an
annual opportunity to obtain net asset value (less a small repurchase fee)
for at least a portion of their Fund shares.
Under its current investment mandate, the Fund may invest
primarily in securities of issuers located in Eastern Europe, although it
is not required to do so. Pursuant to the Restructuring Proposal, the
Fund, consistent with its new name, would normally be REQUIRED to invest
at least 65% of its total assets in equity and debt securities of issuers
(including government issuers) located in Eastern Europe (including, among
others, the countries of Bulgaria, Czech Republic, Germany, Hungary,
Poland, Russia and other countries formerly a part of the Union of Soviet
Socialist Republics). Under this revised mandate, the Fund would not be
precluded from investing in securities of issuers located in Western
Europe, but such investments would normally be restricted to 35% of the
Fund's total assets.
G.T. Capital Management, Inc. ("G.T. Capital"), the Fund's
investment adviser, believes that the dynamic and changing investment
landscape of Eastern Europe currently presents an excellent opportunity
for investors choosing to focus on the equity and debt markets in these
countries. As individual economies in many Eastern European countries
move towards a capitalistic environment with increased privatization of
industries and increased efficiency of management, G.T. Capital believes
<PAGE>
that investments in selected Eastern European issuers present growth
potential as great as anywhere in the world. While investment in such
issuers is not without significant risk, G.T. Capital believes that a
number of the countries of Eastern Europe are presenting favorable
investment environments for foreign investors, and that many Eastern
European issuers are increasingly focusing on profitability and long-term
growth.
In G.T. Capital's view, the proposed change to the Fund's name
and the narrowing of its investment mandate would distinguish the Fund
more clearly from other investment companies that invest broadly across
European markets. G.T. Capital believes that shares of closed-end
investment companies with more narrow and clearly defined investment
mandates tend to be better understood by the investment community than are
shares of closed-end investment companies with more diffuse mandates.
Moreover, shares of closed-end companies with more narrow and clearly
defined investment mandates also tend, in G.T. Capital's view, to be more
highly valued by the market, particularly when issuers covered by such
mandates are otherwise in favor. Accordingly, G.T. Capital believes that
the Restructuring Proposal should enhance the demand for Fund shares and
could have a positive effect on reducing the discount, particularly during
periods in which the market otherwise favors securities of Eastern
European issuers.
In addition to changing the name (and associated investment
mandate) of the Fund, the Restructuring Proposal would effect a conversion
of the Fund to "interval" status. As an "interval fund," the Fund would
be required to make annual offers to repurchase at least 5%, and up to
25%, of its outstanding shares at net asset value (less a small repurchase
fee). Thus, the Restructuring Proposal would ensure that Fund
shareholders are provided with an annual opportunity to sell at least part
of their holdings back to the Fund at net asset value (less the repurchase
fee). Barring unforeseen circumstances, it is currently anticipated that
if the Restructuring Proposal is approved by shareholders, the Fund would
make its first repurchase offer as an "interval fund" on or around the end
of the first quarter of 1996. The Fund currently expects that at such
time, it would offer to repurchase 25% of its outstanding shares for cash
at net asset value (less a small repurchase fee).
As required by provisions in the Fund's Agreement and Declaration
of Trust, the Board is also submitting to shareholders a separate proposal
to convert the Fund to "open-end" status ("Open-Ending Proposal"). The
Restructuring Proposal is fundamentally incompatible with the conversion
of the Fund to "open-end" status. Open-end funds are subject to
limitations on the percentage of illiquid and restricted securities that
may be held in their investment portfolios. G.T. Capital believes that
these limitations would reduce the Fund's investment flexibility and the
scope of its investment opportunities to the point that it would be
impracticable, if not impossible, for the Fund to invest primarily in
Eastern Europe.
Your Board believes that if the Restructuring Proposal is
adopted, the Fund will emerge as a unique and attractive investment
vehicle for long-term shareholders. Your Board is enthusiastic about the
<PAGE>
prospects for the G.T. Global Eastern Europe Fund, and appreciates your
consideration of these proposals. Your Board strongly recommends that
shareholders vote FOR the Restructuring Proposal (Proposal No. 1) rather
than the Open-Ending Proposal (Proposal No. 2). Your Board also
recommends that shareholders vote FOR the election of the two Trustees
named in Proposal No. 3.
To help the Fund avoid the substantial costs of further proxy
solicitations, please complete the proxy card and return it as soon as
possible in the enclosed postage-paid envelope, even if you plan to attend
the meeting in person.
Sincerely yours,
DAVID A. MINELLA
Chairman of the Board
and President
<PAGE>
G.T. GREATER EUROPE FUND
50 California Street
27th Floor
San Francisco, California 94111
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
December 13, 1995
To the Shareholders of G.T. Greater Europe Fund:
Notice is hereby given that a Special Meeting of Shareholders
(the "Meeting") of G.T. Greater Europe Fund (the "Fund") will be held at
50 California Street, 27th Floor, San Francisco, California on December
13, 1995, at 1:00 p.m., Pacific time, for the following purposes:
(1) To consider an Amended and Restated Agreement and Declaration of
Trust reflecting a change of the Fund's name and its conversion
to "interval" status;
(2) To consider a proposal to convert the Fund from a closed-end
investment company to an open-end investment company;
(3) To elect two Trustees to serve until 1998; and
(4) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on October 20,
1995, are entitled to notice of, and to vote at, the Meeting. Your
attention is called to the accompanying Proxy Statement. We sincerely
hope you can attend the meeting. However, whether or not you will attend,
we urge you to PROMPTLY COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD,
so that a quorum will be present and a maximum number of shares may be
voted.
By Order of the Board of Trustees
HELGE K. LEE
Secretary
San Francisco, California
October ____, 1995
YOUR VOTE IS VERY IMPORTANT. BY PROMPTLY COMPLETING, SIGNING AND
RETURNING THE ENCLOSED PROXY CARD YOU WILL HELP YOUR FUND AVOID THE
SUBSTANTIAL ADDITIONAL EXPENSES OF MAKING FURTHER SOLICITATIONS.
<PAGE>
PROXY STATEMENT
G.T. GREATER EUROPE FUND
50 California Street
San Francisco, California 94111
(415) 392-6181
------------------------
SPECIAL MEETING OF SHAREHOLDERS
To Be Held On
December 13, 1995
------------------------
This Proxy Statement is being furnished to shareholders in
connection with the solicitation of proxies by the Board of Trustees of
G.T. Greater Europe Fund (the "Fund"). These proxies are to be used at a
Special Meeting of Shareholders and at any adjournment thereof (the
"Meeting") to be held at the offices of the Fund, 50 California Street,
27th Floor, San Francisco, California 94111, on December 13, 1995, at
1:00 p.m. Pacific time. Each shareholder will be entitled to one non-
cumulative vote for each share owned on all matters to come before the
Meeting. Each fractional share shall be entitled to a proportionate
fractional vote. Only shareholders of record at the close of business on
October 20, 1995 ("Shareholders") are entitled to notice of and to vote at
the Meeting. Copies of this Proxy Statement and the accompanying
materials will first be mailed to Shareholders on or about November __,
1995.
If the accompanying proxy card is properly executed and returned
by a Shareholder in time to be voted at the Meeting, the shares covered
thereby will be voted in accordance with the instructions marked thereon
by the Shareholder. Executed proxy cards that are unmarked will be voted
FOR each proposal recommended by the Board of Trustees as described in
this Proxy Statement. Any proxy given pursuant to this solicitation may be
revoked at any time before its exercise by giving written notice to the
Secretary of the Fund or by the issuance of a subsequent proxy. To be
effective, such revocation must be received by the Secretary of the Fund
prior to the Meeting. In addition, a Shareholder may revoke a proxy by
attending the Meeting and voting in person. The solicitation of proxies
will be made primarily by mail but also may be made by telephone,
telegraph, telecopy and personal interviews. Authorization to execute
proxies may be obtained by telephonic or electronically transmitted
instructions.
At least fifty percent of the Fund's outstanding shares on
October 20, 1995, the record date, represented in person or by proxy, must
be present for the transaction of business at the Meeting. If a quorum is
not present at the Meeting or a quorum is present but sufficient votes to
approve any of the proposals described in the Proxy Statement are not
received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies.
Any such adjournment will require the affirmative vote of a majority of
those shares represented at the Meeting in person or by proxy. The
persons named as proxies will vote those proxies that they are entitled to
vote FOR any such proposal in favor of such an adjournment and will vote
those proxies required to be voted AGAINST any such proposal against such
<PAGE>
an adjournment. A Shareholder vote may be taken on one or more of the
proposals in this Proxy Statement prior to any such adjournment if
sufficient votes have been received and it is otherwise appropriate.
Abstentions will be counted as shares present for purposes of
determining whether a quorum is present, but will not be voted for or
against any adjournment or proposal. Broker non-votes will not be counted
as shares present for purposes of determining whether a quorum is present,
and will not be voted for or against any adjournment or proposal.
Accordingly, abstentions effectively will be a vote against adjournment or
against any proposal where the required vote is a percentage of the shares
present or outstanding. Broker non-votes effectively will be a vote
against any proposal where the required vote is a percentage of the shares
outstanding. Broker non-votes are shares held in street name for which
the broker indicates that instructions have not been received from the
beneficial owners or other persons entitled to vote and for which the
broker does not have discretionary voting authority.
As of October 20, 1995, the record date, there were ________
shares of beneficial interest in the Fund. To the knowledge of the Fund's
management, as of the record date, (1) no single shareholder or "group"
(as that term is used in Section 13(d) of the Securities Exchange Act of
1934) beneficially owned 5% of more of the outstanding voting securities
of the Fund, (2) no current Trustee of the Fund owned 1% or more of the
Fund's outstanding shares, and (3) the officers and Trustees of the Fund
owned, as a group, _____ of the Fund's shares, representing less than 1%
of the Fund's outstanding shares. Of these shares, _____ shares were
owned by G.T. Capital Management, Inc. ("G.T. Capital"), which shares Mr.
Minella is presumed to control.
VOTING INFORMATION
Proposal No. 1 and Proposal No. 2 are fundamentally incompatible.
Implementation of one of the proposals would preclude implementation of
the other. Accordingly, in casting their votes, shareholders should (1)
vote FOR Proposal No. 1, OR (2) vote FOR Proposal No. 2, OR (3) vote to
ABSTAIN with respect to both of the Proposals, OR (4) vote AGAINST both
Proposals. Approval of either Proposal No. 1 or Proposal No. 2 will
require the favorable vote of a majority of the outstanding shares of the
Fund, as defined in the 1940 Act, which means the lesser of the vote of
(a) 67% of the shares of the Fund present at a meeting where more than 50%
of the outstanding shares are present in person or by proxy or (b) more
than 50% of the outstanding shares of the Fund. Unless otherwise
instructed, the proxies will vote FOR Proposal No. 1.
Proposal No. 3 (election of trustees) is not dependent on the
vote with respect to Proposal Nos. 1 and 2. A plurality of the votes cast
at the Meeting in person or by proxy is required for the election of
Trustees under Proposal No. 3.
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<PAGE>
PROPOSAL NO. 1: CONSIDERATION OF AN AMENDED AND RESTATED AGREEMENT AND
DECLARATION OF TRUST
At the Meeting, Shareholders will be asked to vote on a proposal
to amend and restate the Fund's Agreement and Declaration of Trust to
change the name of the Fund to "G.T. Global Eastern Europe Fund" and to
establish a fundamental policy requiring the Fund to make annual offers to
repurchase at least 5%, and up to 25%, of its outstanding shares at net
asset value (less a repurchase fee).
If this proposal is approved, the Board of Trustees of the Fund
expects promptly to amend certain of the Fund's investment policies.
Under these amended policies, the Fund would normally seek to achieve its
investment objective by investing at least 65% of its total assets in
equity and debt securities of issuers (including government issuers)
located in Eastern European countries. Under these amended policies, the
Fund could also invest up to 35% of its total assets in equity and debt
securities of issuers located elsewhere in Europe. The Fund's investment
objective would remain long-term capital appreciation. If this proposal
is approved, the Fund's investment portfolio is expected to be
restructured within six months to reflect the amended policies.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE FOR
APPROVAL OF PROPOSAL NO. 1.
Reasons for Restructuring the Fund.
----------------------------------
The Fund currently may invest primarily in securities of issuers
located in Eastern Europe, although it is not required to do so and has
not historically done so. Under the restructuring, it would be a policy
of the Fund to invest primarily in that region. G.T. Capital believes
that the dynamic and changing investment landscape of Eastern Europe
(including, among others, the countries of Bulgaria, Czech Republic,
Germany, Hungary, Poland, Russia and other countries formerly a part of
the Union of Soviet Socialist Republics) currently presents an excellent
opportunity for investors choosing to focus on the equity and debt markets
in those countries. As individual economies in many Eastern European
countries move towards a capitalistic environment with increased
privatization of industries and increasingly effective management, G.T.
Capital believes that investments in selected Eastern European issuers
present growth potential as great as anywhere in the world. While
investment in such issuers is not without significant risk, G.T. Capital
believes that a number of the developing countries of Eastern Europe are
presenting favorable investment environments for foreign investors, and
that many issuers in those countries are increasingly focusing on
profitability and long-term growth.
In the view of G.T. Capital, the proposed change to the Fund's
name and the associated revision of its investment mandate would
distinguish the Fund more clearly from other investment companies that
invest broadly across European markets. Shares of closed-end investment
companies with more narrow and clearly defined investment mandates tend,
- 3 -
<PAGE>
in G.T. Capital's view, to be better understood by the investment
community than are shares of closed-end investment companies with more
diffuse mandates. G.T. Capital believes that shares of closed-end
companies with more narrow and clearly defined investment mandates also
tend to be more highly valued by the market, particularly when the market
otherwise favors issuers covered by the mandates. Accordingly, G.T.
Capital believes that the Restructuring Proposal should enhance the demand
for Fund shares and could have a positive effect on reducing the discount
to net asset value at which the Fund's shares have traded on the New York
Stock Exchange, Inc. ("NYSE"), particularly during those periods in which
securities of Eastern European issuers are in favor. Of course, there can
be no assurance of such a result.
G.T. Capital does not believe it is advisable for the Fund to
convert to an "open-end" investment company. As an investment company
focusing on the markets of Eastern Europe, the Fund would be investing
primarily in securities that are frequently illiquid and, in any event,
more volatile than securities of comparable issuers located elsewhere in
Europe. Moreover, the limited liquidity of some Eastern European
securities markets could adversely affect at times the Fund's ability to
acquire or dispose of securities at a price and time that it wishes to do
so. Yet as an "open-end" investment company, the Fund would be required
to redeem Fund shares without limit upon shareholder demand. In G.T.
Capital's view, the larger reserves of cash or cash equivalents required
for the Fund to operate prudently as an "open-end" investment company
would reduce the Fund's investment flexibility and the scope of its
investment opportunities to the point that it would be impracticable for
the Fund to focus on the markets of Eastern Europe.
By contrast, G.T. Capital believes that through conversion of the
Fund to "interval" status, the Fund could simultaneously focus on the
markets of Eastern Europe and provide shareholders with liquidity beyond
that available under a traditional "closed-end" structure. As an
"interval" fund, shareholders would be assured an annual opportunity to
liquidate a portion of their shares of the Fund at net asset value (less a
repurchase fee). More specifically, the Fund would be subject to a
fundamental policy contained in its Amended and Restated Agreement and
Declaration of Trust that would require the Fund to make annual offers to
repurchase at net asset value (less a repurchase fee) at least 5%, but no
more than 25%, of its outstanding shares. G.T. Capital believes that
adoption of this policy, with the resulting conversion of the Fund to
"interval" status, should itself also have a positive effect on reducing
the discount from net asset value at which the Fund's shares have
historically traded on the NYSE. However, there can be no assurance of
such a result.
The Board of Trustees has determined that if this proposal is
approved, the first repurchase offer by the Fund would occur no later than
the end of the first quarter of 1996, with subsequent repurchase offers to
be made annually thereafter. The Board has further determined that
barring unforeseen circumstances, the Fund will offer, in this first
annual offer, to repurchase 25% of its outstanding shares. No
- 4 -
<PAGE>
determination has been made with respect to the percentage of outstanding
shares that the Fund would offer to repurchase in subsequent annual
offers. Pursuant to applicable regulation of the United States Securities
and Exchange Commission ("SEC"), the Board is charged with making this
determination for each annual offer prior to the date of each offer.
Amendments to Investment Policies.
---------------------------------
If the proposal to amend and restate the Fund's Declaration of
Trust is approved, the Board will promptly amend certain investment
policies of the Fund. Currently, the Fund's investment policies provide
that (1) the Fund will normally invest at least 65% of its total assets in
a broad range of securities of European issuers in both established and
emerging markets in both Western and Eastern Europe, and (2) the Fund may
also invest up to 35% of its total assets in a combination of securities
of (a) issuers in countries, such as Jordan and Israel, that are not
located in Europe but are linked by tradition, economic markets, cultural
similarities or geography to Europe and (b) issuers located elsewhere in
the world, including but not limited to the United States and Japan, which
have operations in Europe or stand to benefit from political and economic
events in Europe, including those in the Eastern European countries. The
Fund deems an issuer to be located in Europe if it (a) is organized under
the laws of and has its principal office in a European country or (b)
derives 50% or more of its total revenues from business there, provided
that, in G.T. Capital's view, the value of such issuer's securities will
tend to reflect European developments to a greater extent than
developments elsewhere.
If this proposal is approved, the Board of Trustees intends to
amend these two policies to narrow the Fund's investment focus. Under the
amended policies, the Fund would normally invest at least 65% of its total
assets in equity and debt securities of issuers (including government
issuers) located in Eastern Europe. The Fund would define the countries
of Eastern Europe to include: Albania, Bulgaria, Czech Republic, Germany,
Hungary, Poland, Romania, Slovakia, all countries formerly a part of the
Union of Soviet Socialist Republics (including Russia, Belarus, Estonia,
Latvia, Lithuania and Ukraine), and all countries formerly a part of
Yugoslavia. Under the amended policies, the Fund would normally invest at
least 50% of its total assets in the developing markets of Eastern Europe,
which include all of the countries listed above except Germany.
Investment opportunities in certain of these countries are currently
limited, and G.T. Capital expects that initially the Fund's investments in
securities of issuers located in the developing countries of Eastern
Europe would be limited to securities of issuers located in some or all of
the following countries: Bulgaria, Czech Republic, Hungary, Poland and
Russia. Due to the absence of security markets and publicly owned
corporations and due to restrictions on direct investment by foreign
entities in certain Eastern European countries, the Fund may be able to
invest in such countries only through governmentally-approved investment
vehicles or funds. Investment in such investment vehicles or funds may
involve the payment of substantial premiums above the value of such
issuers' portfolio securities, and is subject to limitations under the
- 5 -
<PAGE>
1940 Act. As a stockholder in an investment company, the Fund would bear
its ratable share of that investment company's expenses, including its
advisory and administrative fees. The Fund would deem an issuer to be
located in Eastern Europe if it (a) is organized under the laws of and has
its principal office in an Eastern European country or (b) derives 50% or
more of its total revenues from business in Eastern Europe, provided that,
in G.T. Capital's view, the value of such issuer's securities will tend to
reflect Eastern European developments to a greater extent than
developments elsewhere.
Under the amended policies, the Fund could also invest up to 35%
of its total assets in equity and debt securities of issuers located
elsewhere in Europe. The Fund would define the countries located
elsewhere in Europe to include: Austria, Belgium, Denmark, Finland,
France, Greece, Iceland, Ireland, Italy, Liechtenstein, Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United
Kingdom.
In order to afford the Fund greater flexibility in effecting its
revised investment focus, the Board of Trustees would also amend certain
ancillary investment policies of the Fund. Currently, the Fund may invest
no more than 20% of its total assets in any one "Emerging Market." For
purposes of this policy, each of the countries located in Eastern Europe
(except Germany), as well as Portugal, Greece and Ireland, are deemed by
G.T. Capital to be an Emerging Market. Currently, the Fund also may not
invest more than one-third of its total assets in "Special Situations" and
other securities the disposition of which may be subject to legal or
contractual restrictions or the markets for which may be illiquid.
"Special Situations" include interests in joint ventures, cooperatives,
partnerships and state enterprises, private placements, unlisted
securities, unrated or restructured debt and other similar vehicles. In
addition, the Fund currently (1) may not invest in debt securities rated
below C by Standard & Poor's ("S&P") or Moody's Investors Service, Inc.
("Moody's") or, if unrated, deemed by G.T. Capital to be of comparable
quality, and (2) may not invest more than 35% of its total assets in debt
securities rated B or lower by S&P or Moody's, or, if unrated, deemed by
G.T. Capital to be of comparable quality.
If this proposal is approved, the Board of Trustees intends to
amend these ancillary investment policies, so as to enable the Fund to
take advantage of the dynamic and rapidly changing investment environment
of Eastern Europe. Under the amended policies, the Fund could invest
without restriction in the securities of issuers (including government
issuers) located in any one "Emerging Market." The Fund could also invest
without restriction (consistent with its obligation to maintain adequate
liquidity to satisfy its annual repurchase offers) in "Special Situations"
and other securities the disposition of which may be subject to legal or
contractual restrictions or the markets for which may be illiquid.
Finally, the Fund could invest without restriction in debt securities
rated B or lower by S&P or Moody's (including debt securities rated below
C) or, if unrated, deemed by G.T. Capital to be of comparable quality.
- 6 -
<PAGE>
Under the Fund's amended policies, as under its current policies,
the Fund could continue to invest in "Temporary Investments" (as defined
in the Fund's prospectus) to generate income to defray Fund expenses, for
cash management purposes, for temporary defensive purposes, or pending
investment in accordance with the Fund's investment objective and
policies.
If this proposal is approved, the Fund's investment portfolio is
expected to be restructured within six months to reflect the amended
policies. Such restructuring could be expected to cause higher than
normal portfolio turnover due to sales of portfolio securities. Higher
portfolio turnover involves correspondingly greater brokerage commissions
and other transaction costs that the Fund would bear directly. It may
also result in capital losses and overall net gains upon the liquidation
of certain portfolio positions that otherwise might not be realized that
could result in taxable distributions to shareholders.
Special Risk Considerations Associated with Revising Investment
Mandate. The revision to the Fund's investment policies, and, in
particular, the increased focus on securities of issuers located in
Eastern European countries, presents special risk considerations. Under
its current investment mandate, the Fund is permitted, but not required,
to invest primarily in securities of issuers located in Eastern Europe.
By contrast, under the proposed mandate, the Fund would normally be
required to invest primarily in such securities. Accordingly, the
proposed mandate would reduce G.T. Capital's discretion with respect to
investment of the Fund's assets in securities of issuers located in
countries outside of Eastern Europe, and would require the Fund to be
invested in securities of Eastern European issuers during periods that the
Fund might not be so invested under its current investment mandate.
The narrowing of the Fund's investment mandate will reduce the
Fund's ability to diversify across markets throughout Europe. Indeed,
given limitations on investment opportunities in certain of these
countries, G.T. Capital expects that at least initially, its investments
in securities of issuers (including government issuers) located in Eastern
Europe would be limited to securities of issuers located in some or all of
the following countries: Bulgaria, Czech Republic, Germany, Hungary,
Poland and Russia. Moreover, under the revised policies, the Fund could
invest without limitation in securities of issuers located in any one
Eastern European country. To the extent that the Fund invests in issuers
located in a limited number of countries, the Fund will be subject to
greater risk of being adversely affected by developments in any such
country.
Investment in issuers located in Eastern Europe involves risks
that may differ in kind or degree from risks normally associated with
investment in issuers located elsewhere in Europe, including risks
associated with limited liquidity and resultant price volatility,
political and economic uncertainty, nationalization, expropriation and
confiscatory taxation, fluctuations of currency exchange rates, the
relatively small market capitalization of most existing Eastern European
- 7 -
<PAGE>
securities markets, and the lower levels of disclosure and regulation in
the securities markets as compared to elsewhere in Europe. Certain
Eastern European countries have experienced or are experiencing armed
conflict and other forms of social unrest, hyperinflation, high
unemployment, currency devaluations or other adverse conditions. In
addition, the Fund's ability under the amended policies to invest without
limitation in Special Situations and other securities that may be
illiquid, and lower-grade debt securities may increase the Fund's
investment risks. See Appendix A for additional information on risks
associated with investing in the developing countries of Eastern Europe,
illiquid securities, and lower-grade debt securities.
Conversion to "Interval" Status.
-------------------------------
Background. Rule 23c-3 under the Investment Company Act of 1940,
as amended ("1940 Act"), as adopted by the SEC in 1993, provides that
closed-end management investment companies such as the Fund may make
periodic and certain discretionary repurchases of their securities at net
asset value. Periodic repurchases, which may be for between 5% and 25% of
an investment company's outstanding shares, must be made pursuant to a
fundamental policy approved by shareholders. Discretionary repurchase
offers may be made at the discretion of the investment company, without
shareholder approval, but not more frequently than once every two years.
The provisions of Rule 23c-3 allowing for periodic repurchase offers are
intended to allow closed-end investment companies to provide investors
with a limited ability to resell shares to the companies at approximately
net asset value, a manner of sale that traditionally has been available
only to open-end investment company shareholders.
If Proposal No. 1 is approved, the Fund's Agreement and
Declaration of Trust will be amended to include a fundamental policy
respecting periodic repurchase offers. The policy, which would assure
Fund shareholders an annual opportunity to obtain net asset value (less a
small repurchase fee) for at least some of their shares, is designed, in
part, to seek to reduce the discount to net asset value at which shares of
the Fund have historically traded on the NYSE. There can be no assurance,
however, that adoption of the policy will result in the Fund's shares
trading at a price that equals or approximates net asset value. Moreover,
while the policy is designed, in part, to promote stable portfolio
management and maintain the Fund for its long-term shareholders as a
viable investment vehicle, there can be no assurance that the policy will
lead to such results.
Interval Repurchases. Pursuant to the fundamental policy, the
Fund would be required to make annual offers to repurchase a percentage of
its outstanding shares with redemption proceeds to be paid to
participating shareholders in cash ("Interval Repurchase Program"). The
percentage of outstanding shares that the Fund would offer to repurchase
in each annual offer would be established by the Board of Trustees shortly
before the commencement of such offer, but pursuant to Rule 23c-3 under
the 1940 Act could in no event be less than 5% or more than 25% of the
Fund's then outstanding shares.
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<PAGE>
The Board has determined that the first repurchase offer by the
Fund pursuant to the Interval Repurchase Program would occur no later than
the end of the first quarter of 1996, with subsequent repurchase offers to
be made annually thereafter. The Board has further determined that,
barring unforeseen circumstances, the Fund will offer, in the first annual
offer under the Interval Repurchase Program, to repurchase 25% of its
outstanding shares. No determination has been made with respect to the
percentage of outstanding shares that the Fund would offer to repurchase
under the Interval Repurchase Program in subsequent annual offers.
Interval Exchanges. Adoption of the fundamental policy would
also permit (but not require) the Fund to implement a second type of
annual repurchase offer in addition to the Interval Repurchase Program
discussed above. Under the "Interval Exchange Program," the Fund could
offer to repurchase up to a specified percentage of its outstanding
shares, with redemption proceeds used to purchase shares issued by such
other closed-end investment companies managed by G.T. Capital as may in
the future be organized as closed-end "interval" funds and elect to
participate in this program ("G.T. Interval Funds"). It is contemplated
that under the Interval Exchange Program, payment of redemption proceeds
would be made to an agent, who would purchase, on behalf of participating
shareholders, shares of participating G.T. Interval Funds. In no event
would the percentage of outstanding shares that the Fund offers to
repurchase in a particular offer pursuant to the Interval Repurchase
Program ("Interval Repurchase Offer Amount"), when combined with the
percentage that the Fund offers to repurchase under the Interval Exchange
Program ("Interval Exchange Offer Amount"), exceed 25% of the Fund's
outstanding shares.
The Interval Exchange program will not be implemented unless and
until (1) the Board of Trustees approves the participation of the Fund in
the Interval Exchange Program; (2) one or more other G.T. Interval Funds
are created and elect to participate in the program; and (3) an order is
received from the SEC providing appropriate regulatory relief from
designated provisions of the 1940 Act. There can be no assurance that any
of these conditions will occur. There are no G.T. Interval Funds as of
this date, and there can be no assurance that there will be any such funds
in the future. The Fund's application to the SEC for the referenced
regulatory relief is pending. There can be no assurance that such an
order will be issued or, if issued, that the order will be issued on terms
that would permit the Board, in the exercise of its business judgment, to
decide to effect the Interval Exchange Program.
Fundamental Periodic Repurchase Policy. If this proposal is
approved, the Fund's Declaration of Trust will include the following
fundamental policy regarding periodic repurchases:
(a) The Fund will make offers to repurchase its shares at annual
intervals pursuant to Rule 23c-3 ("Offers"). The Board may place such
conditions and limitations on Offers as may be permitted pursuant to Rule
23c-3 or SEC order.
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<PAGE>
(b) __________[Date] of each year, or the next business day
if such day is not a business day, will be the deadline (the "Repurchase
Request Deadline") by which the Fund must receive repurchase requests
submitted by shareholders in response to the most recent Offer.
(c) The date on which the repurchase price for shares is to
be determined (the "Repurchase Pricing Date") will occur no later than the
[fourteenth] day after a Repurchase Request Deadline, or the next business
day if such day is not a business day.
(d) Offers may be suspended or postponed under certain
circumstances, as provided for in Rule 23c-3.
Repurchases in Excess of the Repurchase Offer Amount; Proration;
Repurchase Fee. The Fund may, but is not obligated to, purchase up to an
additional 2% of the Fund shares outstanding on a Repurchase Request
Deadline if the acceptances under the Interval Repurchase and/or Interval
Exchange Programs of an Offer exceed the Repurchase Offer Amount
applicable to either such program. If the Fund determines not to
repurchase more than the Repurchase Offer Amount, or if Fund shareholders
participating in the Interval Repurchase and/or Interval Exchange Programs
tender shares in an amount exceeding the Repurchase Offer Amount of such
program plus 2% of the shares outstanding on the Repurchase Request
Deadline, the Fund shall repurchase the shares tendered on a pro rata
basis, except that (1) the Fund may accept all shares tendered by
shareholders who own fewer than 100 shares and who tender all of their
shares, before prorating shares tendered by others, (2) the Fund may
accept by lot all shares tendered by shareholders who tender all shares
held by them and who, when tendering their shares, elect to have either
all or none, or a minimum or none, accepted, so long as the Fund first
accepts all shares tendered by shareholders who do not so elect, and (3)
in the event that appropriate exemptive relief is secured from the SEC,
the Fund may, in the event that a strict pro rata repurchase would require
the Fund to repurchase fewer than 5% of a tendering shareholder's shares,
accept such additional amount of shares as necessary to effect a
repurchase of 5% of such shareholder's shares. The Fund's application for
such exemptive relief is pending. There can be no assurance that the
requested relief will be granted by the SEC. If the requested relief is
not granted by the SEC, there may be adverse tax consequences for certain
shareholders. See "Tax Consequences of Offers," below.
Interval Repurchases and Interval Exchanges will be made at the
net asset value determined on the Repurchase Pricing Date, which will be
no later than the [fourteenth] day after the Repurchase Request Deadline
(or the next business day if such day is not a business day). An earlier
Repurchase Pricing Date may be used if, on or immediately following the
Repurchase Request Deadline, it appears that the use of an earlier
Repurchase Pricing Date is not likely to result in significant dilution of
the net asset value of either shares that are tendered for repurchase or
shares that are not tendered. Payment for any shares repurchased pursuant
to an Offer must be made by seven days after the Repurchase Pricing Date
(the "Repurchase Payment Deadline"). The Fund may deduct from a
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<PAGE>
shareholder's proceeds a fee of up to 2% of such proceeds to offset
expenses associated with the Repurchase Offer. This fee will be retained
by the Fund.
Notification. Shareholders will be sent notification containing
specified information at least 21 days, and no more than 42 days, before
the Repurchase Request Deadlines. The information provided will include
the Repurchase Offer Amount for the Interval Repurchase component of the
Offer and, if applicable, the Repurchase Exchange component of the Offer,
the Repurchase Request Deadline, the Repurchase Pricing Date, the
Repurchase Payment Deadline and the applicable repurchase fee.
Notification will also include the procedures for shareholders to tender
their shares, procedures for modifying or withdrawing tenders, procedures
under which the Fund may repurchase such shares on a pro rata basis, and
the circumstances under which the Fund may suspend or postpone the Offer.
The Fund will provide the net asset value of the shares, which will be
computed no more than seven days before the date of notification, the
market price of the shares on the date on which the net asset value was
computed, and the means by which shareholders may ascertain the net asset
value and market price thereafter.
Source of Funds. The Fund anticipates using cash on hand and
liquidating portfolio securities to purchase shares acquired pursuant to
the Offers. There is a risk that the Fund's need to sell securities to
meet repurchase requests may affect the market for the portfolio
securities being sold, which may, in turn, diminish the net asset value of
shares of the Fund. From the time the Fund sends an Offer notification to
shareholders until the Repurchase Pricing Date, the Fund will be required
to maintain liquid assets in an amount equal to at least 100% of the
Repurchase Offer Amount, and portfolio management techniques may be
modified accordingly. This requirement may result in the Fund's
investments in securities of Eastern European issuers temporarily falling
below 65% of its total assets and may, although it is not anticipated to,
affect the ability of the Fund to achieve its investment objective. In
addition, as a result of liquidating portfolio securities, the Fund may
realize gains or losses at a time when G.T. Capital would otherwise
consider it disadvantageous to do so. In such event, some gains may be
realized on securities held for less than one year, which may generate
income taxable to shareholders (when distributed to them by the Fund) at
ordinary income rates, and some gains may be realized on securities held
for less than three months, which is relevant to the Fund's ability to
continue to qualify as a regulated investment company under the Internal
Revenue Code of 1986, as amended (the "Code"). The Fund must limit such
gains to less than 30% of its gross income each year and, accordingly, the
amount of gain the Fund could realize from sales of other securities held
for less than three months would be reduced. This could adversely affect
the Fund's performance.
Offers also could significantly reduce the asset coverage of any
outstanding Fund borrowings below the asset coverage requirements set
forth in the 1940 Act, although the Fund does not currently anticipate
that it will borrow money for investment. Nonetheless, because it could
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<PAGE>
borrow, in order to purchase all shares tendered, the Fund may have to
repay all or part of any then outstanding borrowings to maintain the
required asset coverage. Also, the amount of shares for which the Fund
makes any particular Offer may be affected for the reasons set forth above
or in respect of other concerns related to liquidity of the Fund's
portfolio.
Withdrawal Rights. Tenders made pursuant to an Offer will be
irrevocable after the Repurchase Request Deadline. However, shareholders
may modify the number of shares being tendered or withdraw shares tendered
at any time up to the Repurchase Request Deadline.
Tax Consequences of Offers. The following discussion summarizes
the federal income tax consequences of a tender of shares pursuant to an
Offer. You should consult your own tax adviser regarding specific tax
consequences, including state and local tax consequences, of such a tender
by you.
A tender of Fund shares pursuant to an Offer will be a taxable
transaction for federal income tax purposes. In general, the transaction
should be treated as an exchange of the shares (resulting in capital gain
or loss treatment if the shares are held as capital assets) rather than as
a dividend if the tender (1) completely terminates the shareholder's
interest in the Fund, (2) is "substantially disproportionate" with respect
to the shareholder, or (3) is "not essentially equivalent to a dividend."
A complete termination of a shareholder's interest generally requires that
the shareholder dispose of all shares directly or constructively owned by
him or her. A "substantially disproportionate" distribution generally
requires a reduction of more than 20% in the shareholder's proportionate
interest in the Fund after all shares are tendered. A distribution is
"not essentially equivalent to a dividend" if the shareholder has a
minimal interest in the Fund, exercises no control over Fund affairs and
there is a "meaningful reduction" in the shareholder's proportionate
ownership interest in the Fund.
The Fund has filed an application with the SEC for exemptive
relief so as to permit the Fund to require that the minimum repurchase
amount be at least 5% of a tendering shareholder's shares. This
application is pending, and there can be no assurance that it will be
granted. If the SEC does not grant the requested relief, the "meaningful
reduction" condition discussed above might not be satisfied, with the
result that a tendering shareholder might be treated as having received a
dividend distribution (to the extent there are available earnings and
profits) instead of a payment in exchange for the shareholder's shares.
In that event, it also is possible that non-tendering shareholders could
be treated as having received "deemed dividends" -- i.e., taxable stock
distributions due to their increase in percentage ownership of the Fund
resulting from the Fund's repurchase of shares of tendering shareholders.
The Fund will be required to withhold 31% of the gross proceeds
paid to an individual or certain other non-corporate shareholder or other
payee pursuant to an Offer if (1) the Fund has not been provided with the
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<PAGE>
shareholder's taxpayer identification number (which, for an individual, is
usually the social security number) and a certification under penalties of
perjury (a) that such number is correct and (b) that the shareholder is
not subject to backup withholding as a result of failure to report all
interest and dividend income or (2) the Internal Revenue Service or a
broker notifies the Fund that the number provided is incorrect or backup
withholding is applicable for other reasons. Foreign shareholders are
required to provide the Fund with a completed IRS Form W-8 to avoid 31%
withholding on payments received on a sale or exchange. Foreign
shareholders may be subject to withholding of 30% (or a lower treaty rate)
on any portion of proceeds received from a repurchase that is deemed to
constitute a dividend.
Suspension and Postponement of Offers. The Fund may suspend or
postpone an Offer by vote of a majority of the Board of Trustees
(including a majority of the Trustees who are not "interested persons," as
that term is defined in the 1940 Act, of the Fund), but only (1) if
repurchases pursuant to the Offer would impair the Fund's status as a
regulated investment company under the Code; (2) if repurchases pursuant
to the Offer would cause the shares to be neither listed on any national
securities exchange nor quoted on any inter-dealer quotation system of a
national securities association; (3) for any period during which the NYSE
or any other market in which the securities owned by the Fund are
principally traded is closed, other than customary week-end and holiday
closings, or during which trading in such market is restricted; (4) for
any period during which an emergency exists as a result of which disposal
by the Fund of securities owned by it is not reasonably practicable, or
during which it is not reasonably practicable for the Fund fairly to
determine its net asset value; or (5) for such other periods as the SEC
may by order permit for the protection of shareholders of the Fund.
If an Offer is suspended or postponed, the Fund will provide
notice thereof to shareholders. If the Fund renews a suspended Offer or
reinstitutes a postponed Offer, the Fund will send a new notification to
all shareholders.
Special Risk Considerations. Shareholders should be aware of the
following special risk considerations associated with the Fund's intention
to make periodic Interval Repurchases and Interval Exchanges:
. In the event of an oversubscription of an Offer,
shareholders may be unable to liquidate all or a
given percentage of their shares at net asset
value during the repurchase period.
. From the time the Fund sends an Offer notification to
shareholders until the Repurchase Pricing Date, the Fund
will be required to maintain liquid assets in an amount
equal to 100% of the Repurchase Offer Amount, and
portfolio management techniques may be modified
accordingly. This requirement may result in the Fund's
investments in securities of Eastern European issuers
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<PAGE>
temporarily falling below 65% of its total assets and
may, although it is not anticipated to, affect the
ability of the Fund to achieve its investment objective.
Furthermore, there may be an increase in portfolio
turnover and a corresponding increase in transaction
costs. In addition, since shares of the Fund are
repurchased on an annual basis, the concurrent reduction
in the Fund's asset value may decrease its investment
opportunities and will increase its expense ratio.
. There is a risk of decline in net asset value as a result
of the delay between the Repurchase Request Deadline and
the Repurchase Pricing Date, due to declines, among other
things, in prices of securities held by the Fund and
fluctuations in the currencies in which such securities
are denominated relative to the U.S. dollar.
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<PAGE>
PROPOSAL NO. 2: CONSIDERATION OF CONVERTING THE FUND TO AN OPEN-END
INVESTMENT COMPANY
The Fund's Declaration of Trust requires that a proposal to
convert the Fund into an open-end investment company be submitted to
shareholders by January 31, 1996, if the Fund has not earlier commenced a
tender offer for its shares or if less than all shares tendered in such an
offer have not been purchased by September 30, 1995. At a meeting held on
June 20, 1995, the Board of Trustees determined that a tender offer was
not at that time in the best interests of the Fund's shareholders, and the
Board has not otherwise since determined that such a tender offer should
be made. Accordingly, in compliance with the Declaration of Trust, the
Board of Trustees is submitting to Shareholders for their consideration
this proposal to change the Fund's subclassification under Section 5(a) of
the 1940 Act from a "closed-end company" to an "open-end company."
Conversion of the Fund to an open-end investment company and the
proposed restructuring described in Proposal No. 1 are mutually exclusive.
As an open-end company, the Fund could not operate as an "interval"
investment company. Moreover, for the reasons described in Proposal No.
1, it would be impracticable, in G.T. Capital's view, for the Fund to
focus on the markets of Eastern Europe if it were to convert to open-end
status. As discussed more fully herein, the Board of Trustees does not
believe that it would be in the best interests of shareholders to convert
the Fund to an open-end investment company. Rather, the Board believes
that the proposed restructuring of the Fund described in Proposal No. 1
would better serve the interests of shareholders. ACCORDINGLY, THE
TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE FOR PROPOSAL NO. 1,
RATHER THAN THIS PROPOSAL NO. 2.
Background.
----------
As a closed-end investment company, the Fund's shares are bought
and sold in the securities markets at prevailing prices, which may be
equal to, less than or greater than net asset value. Like many closed-end
investment companies, the Fund's shares have historically traded at a
discount from net asset value. As of [October 15, 1995], the Fund's
shares were trading at a discount of approximately ____% from net asset
value.
Despite trading at a discount to net asset value, the Fund and
other closed-end investment companies offer a number of advantages over
open-end investment companies. Among the most important advantages, the
investment adviser of a closed-end investment company is free to manage
the fund for long-term performance because the fund has a fixed amount of
capital and can be managed without having to give consideration to cash
in-flows and out-flows from daily sales or redemptions of its shares.
While open-end investment companies must maintain sufficient cash reserves
to provide for shareholder redemptions in uncertain amounts, closed-end
investment companies can remain almost fully invested. Furthermore, it is
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<PAGE>
widely believed that more open-end fund redemptions occur during periods
of depressed prices, which often are advantageous times to purchase and
poor times to sell portfolio securities. Conversely, it is widely
believed that more new money tends to be invested in open-end funds near
market peaks, which generally are not favorable times for funds to invest.
These factors have a tendency to increase investment volatility of open-
end funds. Closed-end investment companies like the Fund, by contrast,
are able to maintain their investment strategy during these peaks and
troughs without their portfolio managers being forced to invest new money
or liquidate portfolio holdings at times when sound investment practice
dictates otherwise and without generating unnecessary portfolio turnover
and brokerage expenses.
Significantly, a closed-end format also permits managers to
commit a larger proportion of their assets to illiquid and less liquid
securities, such as private placements of securities and offerings by
newer and/or small companies, which often have greater potential for
growth than more liquid securities. Of course, such securities also have
more risks attached. If the Fund were converted to an open-end fund, it
would not be permitted to have more than 15% of its net assets invested in
illiquid securities. Closed-end funds can use other investment
techniques, including leverage, not generally available to open-end funds.
These techniques, particularly those related to investing in less liquid,
newer enterprises, are particularly useful when investing in newer markets
and in smaller companies, which is what the Fund has done at times, and
which the restructured Fund can be expected to do if Proposal No. 1 is
approved.
There are also costs and disadvantages associated with converting
to and operating as an open-end fund. Conversion could be expected to be
followed by redemptions in large volume, which in turn could lead to
forced sales of portfolio securities, with resultant possible losses upon
liquidation of positions, the possible realization of capital gains and
resulting unfavorable tax consequences to some shareholders, and
disruption to the portfolio. Brokerage costs could also be expected to
increase, due to sale by the Fund of securities in anticipation of
redemptions and to possible reinvestment of monies not needed for
satisfying redemption requests. Conversion to open-end status could also
adversely affect the Fund's subsequent investment performance by
necessitating sales of portfolio securities to raise cash for redemption
purposes. In addition, the Fund's total operating expenses could
increase, as well as transaction costs resulting from increased portfolio
turnover due to ongoing redemptions (and possible continuous sales).
The Board believes that the restructuring contemplated by
Proposal No. 1, in contrast to the conversion to open-end status
contemplated by Proposal No. 2, should contribute to stable portfolio
management, reduce the potential for adverse tax effects and maintain the
Fund for its long-term shareholders as a viable investment vehicle
operating under a reasonable expense ratio. At the same time, Proposal
No. 1 will introduce a measure of liquidity at approximately net asset
value for shareholders seeking that option. Accordingly, the Board of
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Trustees believes that Proposal No. 1 recommended in this Proxy Statement
is preferable to conversion of the Fund to open-end status.
Differences Among Open-End, Closed-End and Closed-End Interval
Investment Companies.
There are various legal, operational and practical differences
among closed-end investment companies, closed-end companies making
mandatory periodic repurchase offers ("interval investment companies"),
and open-end investment companies. Certain of these differences are
discussed below.
Fluctuation of Capital. Open-end investment companies, commonly
referred to as "mutual funds," issue redeemable securities. The holders
of redeemable securities have the right to surrender those securities to
the mutual fund and obtain in return their proportionate share of the
value of the fund's net assets (less any redemption fee charged by the
fund or contingent deferred sales charge imposed by the fund's
distributor). Most mutual funds also continuously sell new shares to
investors based on the fund's net asset value at the time of such
issuance. Accordingly, an open-end fund may experience continuing inflows
and outflows of cash depending on whether it experiences net sales or net
redemptions of its shares.
Closed-end investment companies neither redeem their outstanding
shares nor do they generally engage in the continuous sale of new shares,
and thus operate with a relatively fixed capitalization. Shares of
closed-end investment companies normally trade in securities markets; for
example, the Fund's shares are traded on the NYSE. A closed-end fund
trading at a discount may not be able to raise capital through share sales
when it believes further investment would be advantageous because the 1940
Act restricts the ability of a closed-end fund to sell its shares at a
price below net asset value.
Interval investment companies do not issue redeemable securities,
but make periodic offers to repurchase from 5% to 25% of their outstanding
shares at net asset value (less a repurchase fee). Shares of interval
investment companies may trade in securities markets; for example, if the
Fund were to convert to interval status, its shares would continue to be
traded on the NYSE. As with closed-end funds, the 1940 Act restricts the
ability of an interval fund to sell its shares at a price below net asset
value.
Portfolio Management. Unlike open-end funds, closed-end
investment companies are not subject to pressure to sell portfolio
securities at disadvantageous times or prices to satisfy shareholders'
requests for redemptions. As a result, closed-end funds are not required
to keep a portion of their portfolios in highly liquid assets to satisfy
redemptions and may invest with a greater emphasis on longer term
considerations. The ability to be more fully invested means that a larger
portion of the Fund's portfolio is generating the income and gains to be
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<PAGE>
used by the Fund to pay periodic dividends and distributions to its
shareholders.
Interval investment companies are also subject to lesser pressure
than open-end funds to sell portfolio securities at disadvantageous times
or prices to satisfy shareholders' requests to liquidate their
shareholdings. Unlike shareholders in open-end funds, shareholders in an
interval fund may not sell their shares back to the fund at any time, but
only in response to the fund's periodic repurchase offers. Moreover,
unlike an open-end fund, an interval fund need not repurchase any and all
shares tendered by its shareholders. The 1940 Act provides that an
interval fund may offer to repurchase no more than 25% of its outstanding
shares in any single periodic repurchase offer. As a result, interval
funds are required to keep only a portion of their portfolios in highly
liquid assets to satisfy repurchases, and even this portion must be kept
in highly liquid assets only during the pendency of the funds' repurchase
offers. Accordingly, interval funds may invest with a greater emphasis on
longer term considerations than open-end funds (although with a lesser
emphasis than other closed-end funds). As with other closed-end funds,
the ability to be more fully invested means that a larger portion of an
interval fund's portfolio is generating the income and gains to be used by
the fund to pay periodic dividends and other distributions to its
shareholders.
Cash and Cash Equivalents. Most open-end funds maintain reserves
of cash or cash equivalents to meet net redemptions as they may arise.
Because closed-end investment companies do not have to meet redemptions,
their cash reserves can be substantial or minimal, depending primarily on
management's perception of market conditions. The larger reserves of cash
or cash equivalents required to operate prudently as an open-end fund when
net redemptions are anticipated could reduce an open-end fund's investment
flexibility, the scope of its investment opportunities and the income
earning potential of its investment portfolio.
Unlike other closed-end investment companies, interval investment
companies have to meet periodic repurchase obligations, and therefore
periodically need to maintain reserves of cash or cash equivalents in
order to satisfy these obligations. However, because the timing of these
repurchase obligations is predetermined, and because interval investment
companies are in a position to estimate in advance the maximum amount of
their repurchase obligation (which may range from 5% to 25% of outstanding
shares), the reserves of cash or cash equivalents required to operate
prudently as an interval investment company are less likely than in the
case of an open-end fund to reduce investment flexibility, the scope of
investment opportunities, and the income earning potential of the fund's
investment portfolio.
Redeemability of Shares; Effect on Discount and Premium. Open-end
funds are required to redeem their shares at a price based on their then-
current net asset value on no more than seven days' notice (except during
periods when the NYSE is closed or trading thereon is restricted, or as
redemptions may otherwise be suspended in an emergency as permitted by the
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<PAGE>
1940 Act). The open-end fund structure thus practically precludes the
possibility of the mutual fund's shares trading at a discount from, or a
premium to, net asset value.
Interval investment companies are required to make periodic
offers to repurchase a specified percentage of their outstanding shares at
net asset value (less a repurchase fee). While the interval fund
structure does not preclude the possibility of an interval fund's shares
trading at a discount from, or a premium to, net asset value, it is
anticipated that the effect of periodic repurchase offers should be to
reduce the discount from net asset value at which an interval fund's
shares may be trading, at least during the immediate period around each
periodic offer. There is no assurance that the structure will, in fact,
serve to reduce the discount at which an interval fund's shares may be
trading. Moreover, there can be no assurance that an interval fund
structure would not reduce any premium to net asset value at which an
interval fund's shares may be trading, particularly since a reduction in
the net assets of the fund as a result of a periodic repurchase may
adversely affect the market's perception of the value of the fund.
Raising Capital; Potential Net Redemptions. A closed-end fund
trading at a discount may not be able to raise capital through share sales
when it believes further investment would be advantageous because the 1940
Act restricts the ability of a closed-end fund to sell its shares at a
price below net asset value. The 1940 Act also restricts the ability of
an interval investment company to sell its shares at a price below net
asset value. Because open-end funds are redeemable at net asset value
and, by definition, never trade at a discount, open-end funds do not face
the same difficulties in raising capital.
The ability of an open-end fund to raise new money may achieve
greater economies of scale and improve investment management.
Nevertheless, conversion of a closed-end fund to an open-end fund could
result in immediate redemptions and hence a reduction in the size of the
fund, although this result could also be fully offset (or more than
offset) by new sales of the fund's shares and by reinvestment of dividends
and other distributions in shares of the newly converted open-end fund.
If the value of the new shares sold exceeds the value of shares redeemed,
the newly converted fund would experience an increase in assets. If
redemptions exceeded sales of new shares, however, the resulting decreased
asset base would produce less income than at present and the ratio of
operating expenses to income would increase. Significant net redemptions
could render a converted fund an uneconomical venture by virtue of its
diminished size. Also, in the event temporary investments and borrowings
are exhausted, the result of meeting net redemptions may be that the more
liquid securities of the open-end fund will be sold, leaving the fund with
the less-liquid, lower-grade securities and, accordingly (in the absence
of new net sales), less able to accommodate subsequent redemptions.
Underwriting Costs; Brokerage Commissions or Sales Charges on
Purchases and Sales. Open-end investment companies typically seek to sell
shares on a continuous basis to offset redemptions and maintain (or
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increase) asset base. Shares of "load" open-end investment companies are
normally offered and sold through a principal underwriter that deducts a
sales charge from the purchase price at the time of purchase or from the
redemption proceeds at the time of redemption, or receives a distribution
fee paid out of the assets of the fund, or both, to compensate it and
broker-dealer firms selling shares of the fund to their customers for
sales and marketing services. Shares of "no-load" open-end investment
companies, on the other hand, are sold at net asset value, without a sales
charge, with the fund's investment adviser or an affiliate normally
bearing the cost of sales and marketing from its own resources.
Shares of closed-end and interval investment companies, on the
other hand, are bought and sold in secondary market transactions at
prevailing market prices subject to the brokerage commissions charged by
the broker-dealer firms executing such transactions, which are generally
less than the amount of the "load."
New York Stock Exchange Listing and Fees. The Fund is currently
listed on the NYSE, and the Board of Trustees believes that the Fund's
NYSE listing is a valuable asset. If the Fund were to convert to interval
fund status, it will continue to be listed on the NYSE. Certain
investors, such as pension funds, have internal restrictions on the amount
of their portfolios that can be invested in non-listed securities.
Conversion to an open-end fund would require immediate de-listing of the
Fund from the NYSE and could force the redemption of shares by
shareholders subject to such restrictions. By de-listing, the Fund would
save the annual NYSE fee of approximately $24,300, but, as a result of de-
listing, would have to pay the federal and state blue sky fees on sales or
registrations of new shares discussed below.
Blue Sky Restrictions and Registration Fees. Because the Fund is
currently listed on the NYSE, it is exempt from the securities
registration process of most states. As an interval fund, the Fund would
also be exempt from the securities registration process of most states.
If the Fund were to convert to an open-end fund that continually offers
its shares, the Fund would have to bear the cost of federal and state
registration fees, which can be significant. Such fees could range from
approximately $20,000 to $100,000 annually, depending on the projected
sales of shares of the Fund and the number of classes of shares of the
Fund. The Fund would also be required to observe certain state investment
limitations. This could further limit the Fund's ability to invest in
illiquid and restricted securities.
Leverage. The 1940 Act prohibits open-end funds from issuing
"senior securities" representing indebtedness (i.e., bonds, debentures,
notes and other similar securities), other than indebtedness to banks
where there is an asset coverage ratio of at least 300% for all
borrowings. Closed-end investment companies have greater flexibility in
this regard. In addition, closed-end investment companies may issue
preferred stock (subject to various limitations), whereas open-end
investment companies generally may not issue preferred stock. Interval
investment companies are treated, for these leverage purposes, identically
- 20 -
<PAGE>
to other closed-end investment companies. This ability to issue senior
securities may give closed-end investment companies and interval
investment companies more flexibility in "leveraging" their investment
portfolios.
Annual Shareholder Meetings. The Fund is organized as a
Massachusetts business trust under the terms of an Agreement and
Declaration of Trust which does not require annual meetings of
shareholders, except when required for certain 1940 Act matters. However,
as a closed-end fund with shares listed on the NYSE, the Fund is subject
to NYSE rules requiring annual meetings of shareholders. As an interval
investment company, the Fund would continue to be subject to these NYSE
rules. If the Fund is converted to an open-end fund, by contrast, it
would no longer be subject to these NYSE rules, and annual shareholder
meetings could be eliminated except when required for certain 1940 Act
votes, saving the Fund the cost of these meetings.
Shareholder Services. Open-end funds typically provide more
services to shareholders than closed-end funds or interval funds and incur
correspondingly higher shareholder servicing expenses. The costs of these
services are normally borne by the open-end fund rather than by individual
shareholders.
Reinvestment of Dividends and Other Distributions. The Fund's
current Dividend Reinvestment Plan ("Plan") permits shareholders to elect
to reinvest their dividends and other distributions on a different basis
than would be the case if the Fund converted to an open-end fund. As an
open-end fund, all dividends and other distributions would be reinvested
at the net asset value of the Fund's shares. Currently, in the event Fund
shares are trading at a discount, the agent for the Plan will, if
possible, buy as many Fund shares as are available on the NYSE or
elsewhere. This permits a reinvesting shareholder to benefit by purchasing
additional shares at a discount; this buying activity may also tend to
lessen any discount. However, in the event shares are trading at a
premium, reinvesting shareholders are issued shares at the higher of the
net asset value or 95% of the market price. As an interval fund, the Plan
would continue to apply as currently in effect.
Experience with Structure. The traditional closed-end and open-
end structures are both of long standing, and G.T. Capital has experience
with managing both types of funds. The interval fund structure was
created in 1993 through regulation adopted by the SEC. Few funds have
utilized the structure, and G.T. Capital has no previous experience
managing such funds.
Other Effects of Conversion to Open-End Fund Status.
---------------------------------------------------
In addition to the differences inherent in closed-end, interval
and open-end investment companies, certain negative results would
necessarily derive from the act of conversion itself. These include:
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<PAGE>
Redemption Expenses. Net redemptions would be likely to occur
immediately after conversion of the Fund to an open-end fund, which in
turn would result in increased brokerage expenses and increased
recognition of taxable gains and losses. These redemptions could reduce
the assets of the Fund to a level lower than is economically viable,
resulting in a decision to terminate and liquidate the Fund. At a
minimum, the Fund's expense ratio would likely increase because the cost
of many services would remain the same while the assets of the Fund would
have decreased.
Recognition of Capital Gains; Qualification as a Regulated
Investment Company. If the Fund converts to an open-end fund it might be
required to sell portfolio securities to satisfy redemption requests. If
the Fund's tax basis for the securities it sold were less than the net
sale proceeds, a capital gain would be realized. To the extent those
capital gains were short-term, the Fund might have to distribute them to
retain its qualification for treatment as a regulated investment company
under the Code; and regardless of whether they were long-term or short-
term capital gains, the Fund (1) might have to distribute them to avoid a
4% excise tax imposed on certain undistributed gains (and income) of
regulated investment companies and (2) would have to distribute those
gains to avoid being taxed on them. This recognition and distribution of
gains would have two negative consequences: first, non-redeeming
shareholders would be required to pay taxes on a greater amount of capital
gain distributions than otherwise would be the case; and second, to raise
cash to make the distributions, the Fund might need to sell additional
portfolio securities, thereby possibly being forced to realize additional
capital gains. [Currently, the Fund does not have significant unrealized
capital gains; however, it is impossible to predict what the amount of
unrealized gains or losses would be in the Fund's portfolio at the time of
any possible conversion to open-end status.]
Operation of the Fund if Proposal No. 2 is Approved.
---------------------------------------------------
Proposal No. 2, if approved by the required vote of shareholders,
would change the Fund's subclassification under the 1940 Act from a
"closed-end" to an "open-end" company. If the proposal is approved by the
requisite vote, the Board of Trustees will direct the Fund to commence
operations as an "open-end" company as soon as practicable, taking into
consideration, among other factors, the fact that the Fund will be
required to liquidate some portfolio investments prior to its commencement
of operations as an "open-end" company. If the Fund were to commence
operations as an "open-end" company, outstanding shares of the Fund would
be redeemable at their net asset value, with proceeds to be sent generally
within seven days after execution of a redemption request in proper form.
The Board expects that if the proposal were approved, it would authorize a
redemption fee equal to 2% of net asset value of the redeemed shares to be
imposed on redemptions (whether in cash or in-kind) occurring within the
first six months of the change in status of the Fund. The redemption fee,
which is similar to that imposed by other funds that have converted to
open-end status, is designed to offset the effect on remaining
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<PAGE>
shareholders of costs of liquidating portfolio securities, and to
reimburse the Fund for administering the redemption program.
If the Fund is converted to open-end status, the Board also
reserves the right to meet redemptions by delivering portfolio securities
of the Fund to the redeeming shareholder in kind, rather than paying cash.
Such redemptions in kind would shift the brokerage cost of liquidating the
portfolio securities from the Fund (and its remaining shareholders) to the
redeeming shareholder.
If the Fund is converted to open-end status, the Board of
Trustees will thereafter consider, in light of existing and anticipated
redemption activity and such other factors as the Board may find relevant,
whether the Fund should sell new shares on a continuous basis or whether
one or more other courses of action would better serve the interests of
shareholders. Accordingly, the Board may, at a later date, seek
shareholder approval in connection with any such courses of action,
including, if a determination is made that the Fund should sell new shares
on a continuous basis, shareholder approval for one or more amendments to
the Management Agreement between the Fund and G.T. Capital, the adoption
of a plan of distribution pursuant to Rule 12b-1 under the 1940 Act,
and/or other matters.
- 23 -
<PAGE>
PROPOSAL NO. 3: ELECTION OF TRUSTEES
The Fund's Trustees, all of whom are listed below, are divided
into three classes. Upon expiration of the initial term of office of each
Trustee, a Trustee elected to succeed the Trustee whose term of office
expires shall be elected for a term expiring on the date of the third
annual meeting of shareholders or special meeting in lieu thereof
following his or her election. The term of the Class 2 Trustees expires in
1995. The terms of Class 1 and 3 Trustees will expire in 1996 and 1997,
respectively. It is proposed that the Class 2 Trustees be elected at the
Meeting to serve for a term expiring in 1998.
The classification of the Fund's Trustees helps to promote the
continuity and stability of the Fund's management and policies because the
majority of the Trustees at any given time will have prior experience as
Trustees of the Fund. At least two shareholders meetings, instead of one,
are required to effect a change in a majority of the Trustees, except in
the event of vacancies resulting from removal for cause or other reasons,
in which case the remaining Trustees may fill the vacancies so created.
Accordingly, at the Meeting, two Trustees will be elected to serve until
the Fund's 1998 Annual Meeting of Shareholders.
It is the intention of each proxy named on the accompanying proxy
card to vote FOR the election of the nominees listed below unless the
Shareholder specifically indicates in his or her proxy card the desire to
withhold authority to vote for any nominee. The affirmative vote of the
holders of a plurality of the Fund's shares voting at the meeting is
required to elect each nominee. Unless otherwise specified, each
Shareholder (or his or her substitute) may cast an equal number of votes
for each nominee for Trustee. Shareholders of the Fund do not have
cumulative voting rights with respect to the election of the Trustees.
The Board of Trustees does not contemplate that the nominees, who have
consented to being nominated, will be unable to serve as Trustee for any
reason, but if that should occur prior to the meeting, the proxies will be
voted for such other nominee[s] as the Board of Trustees may recommend.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" THE
CLASS 2 TRUSTEES LISTED IN PROPOSAL NO. 3
The Trustees, including the nominees, have served as Trustees
since the Fund's commencement of operations in March, 1990. Mr. Minella is
an "interested person" of the Fund, as defined in the 1940 Act, by virtue
of his employment by G.T. Capital, the Fund's investment manager.
- 24 -
<PAGE>
INFORMATION REGARDING NOMINEES FOR ELECTION AT THE SPECIAL MEETING
<TABLE>
<CAPTION>
Shares of the Fund beneficially
Name, age, business experience during the Position(s) with owned directly or indirectly
past five years and other directorships the Fund on October 20, 1995
------------------------------------------- ---------------- -----------------------------
<S> <C> <C>
Class 2 Term Expires 1998
Arthur C. Patterson, Age ___ Trustee
Mr. Patterson is a Managing Partner of Accel
Partners, a venture capital firm. He also serves
as a director of various computing and software
companies. He also is a director or trustee of
each of the other investment companies registered
under the 1940 Act that is managed or
administered by G.T. Capital.
Ruth H. Quigley, Age 60 Trustee
Miss Quigley is a private investor. From 1984 to
1986, she was President of Quigley Friedlander &
Co., Inc., a financial advisory services firm.
She also is a director or trustee of each of the
other investment companies registered under the
1940 Act that is managed or administered by G.T.
Capital.
INFORMATION REGARDING TRUSTEES WHOSE CURRENT TERMS CONTINUE
Class 3 - Term Expires 1996 Chairman of the
David A. Minella, Age 43 Board, Trustee and
President
Mr. Minella has been a Director of BIL GT Group
Limited (the holding company of the various
international G.T. Companies), since 1990; the
President of the Asset Management Division, BIL
GT Group Limited, since _____; a Director and
President of G.T. Capital since 1989; a Director
and the President of G.T. Global Financial
Services, Inc. ("G.T. Global"), a registered
broker/dealer and distributor of the G.T. Global
Mutual Funds, since 1987; a Director and
President of G.T. Global Investor Services, Inc.
("G.T. Services"), transfer agent of the G.T.
Global Mutual Funds, since 1990; and a Director
and President of G.T. Global Insurance Agency,
Inc., since 1992. He also is a director or
trustee of each of the other investment companies
registered under the 1940 Act that is managed or
administered by G.T. Capital.
- 25 -
<PAGE>
Shares of the Fund beneficially
Name, age, business experience during the Position(s) with owned directly or indirectly
past five years and other directorships the Fund on October 20, 1995
------------------------------------------- ---------------- -----------------------------
Class 1 Term Expires 1997 Trustee
C. Derek Anderson, Age 54
Mr. Anderson is the Chief Executive Officer of
Anderson Capital Management, Inc. (a San
Francisco-based investment advisory firm), the
Chairman and Chief Executive Officer of
Plantagent Holdings, Ltd.; a Director of
Munsingwear, Inc.; a Director of American
Heritage Group, Inc., and various other
companies. He also is a director or trustee of
each of the other investment companies registered
under the 1940 Act that is managed or
administered by G.T. Capital.
Frank S. Bayley, Age 56 Trustee
Mr. Bayley is a partner of the law firm of Baker
& McKenzie; a Director and Chairman of C.D.
Stimson Company (a private investment company);
and a Trustee of the Seattle Art Museum. He also
is a director or trustee of each of the other
investment companies registered under the 1940
Act that is managed or administered by G.T.
Capital.
</TABLE>
The above information provides the business experience of each
Trustee during at least the past five years. Corresponding information
with respect to the executive officers of the Fund is provided below. See
"Other Information -- Executive Officers of the Fund."
[On October 20, 1995, the Trustees and Officers of the Fund as a
group owned beneficially ____ shares of the Fund, representing less than
1% of the outstanding shares of the Fund. Of these shares, ___ shares are
owned by G.T. Capital, which Mr. Minella is presumed to control.]
There were seven meetings of the Board of Trustees held during
the fiscal year ended October 31, 1995, and each Trustee attended at least
75% of those meetings. The Board of Trustees has an Audit Committee
comprised of Miss Quigley and Messrs. Anderson, Bayley and Patterson. The
purpose of the Audit Committee is to oversee the annual audit of the Fund
and review the performance of the Fund's independent public accountants.
During the Fund's fiscal year ended October 31, 1995, the Audit Committee
met one time.
Each Trustee serves in total as a director or trustee,
respectively, of nine registered investment companies with 39 series
managed or administered by G.T. Capital. The Fund pays each Trustee who
- 26 -
<PAGE>
is not a director, officer or employee of G.T. Capital or any affiliated
company an annual fee of $5,000, plus $300 for each meeting of the Board
or any committee of the Board attended by such Trustee, and reimburses
travel and other out-of-pocket expenses incurred in connection with
attendance at such meetings. [For the Fund's fiscal year ended October
31, 1995, the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Fund, in the aggregate received fees and expense
reimbursements totalling $______.] Mr. Minella received no compensation
from the Fund.
- 27 -
<PAGE>
The table below includes certain information relating to the
compensation of the Fund's Trustees for the fiscal year ended October 31,
1995.
<TABLE>
<CAPTION>
COMPENSATION TABLE
------------------
Pension or
Retirement Total
Aggregate Benefits Compensation
Compensation Accrued as Part Estimated Annual From the Fund
Name of Person, from of the Fund's Benefits Upon and the Fund
Position the Fund Expenses Retirement Complex
-------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
C. Derek Anderson, Trustee
Frank S. Bayley, Trustee
David A. Minella, Trustee and
President
Arthur C. Patterson, Trustee
Ruth Q. Quigley, Trustee
</TABLE>
OTHER INFORMATION
Information Regarding G.T. Capital
G.T. Capital is the U.S. member of the G.T. Group, an
international advisory organization established in 1969 for the purpose of
rendering international portfolio management services to both
institutional and individual clients. As of August 31, 1995, aggregate
assets under G.T. Group management exceeded $22 billion, of which more
than $19 billion was invested in the securities of non-U.S. issuers. G.T.
Capital was established in San Francisco in 1974 and maintains offices at
50 California Street, San Francisco, California 94111. In addition to the
San Francisco office, the G.T. Group maintains investment offices in
London, Hong Kong, Tokyo, Toronto, Singapore and Sydney.
G.T. Capital and the other companies in the G.T. Group are
indirect subsidiaries of BIL GT Group AG ("BIL GT Holdings"), a financial
services holding company. BIL GT Holdings in turn is controlled by the
Prince of Liechtenstein Foundation, which serves as the parent
organization for the various business enterprises of the Princely Family
of Liechtenstein. The principal business address for BIL GT Holdings and
the Prince of Liechtenstein Foundation is Herrengasse 12, FL-9490, Vaduz,
Liechtenstein.
Executive Officers of the Fund
- 28 -
<PAGE>
The executive officers of the Fund are listed below. The
business address of each officer is 50 California Street, San Francisco,
California 94111.
David A. Minella, age 43, is President of the Fund. Mr. Minella
is a Trustee and Chairman of the Board and President of G.T.
Capital. Additional information about Mr. Minella is provided
above.
Helge K. Lee, age 49, is Vice President and Secretary of the
Fund. Mr. Lee has been Senior Vice President, General Counsel
and Secretary of G.T. Capital, G.T. Global Financial Services,
Inc. and G.T. Global Investor Services, Inc. since May 1994. Mr.
Lee was the Senior Vice President, General Counsel and Secretary
of Strong/Corneliuson Management, Inc. and Secretary of each of
the Strong Funds from October 1991 through May 1994. For more
than five years prior to October 1991, he was a shareholder in
the law firm of Godfrey & Kahn, S.C., Milwaukee, Wisconsin.
F. Christian Wignall, age 39, is Vice President of the Fund. Mr.
Wignall has been Senior Vice President, Chief Investment
Officer -- Global Equities and a Director of G.T. Capital since
1987, and Chairman of the Investment Policy Committee of the
affiliated international G.T. companies since 1990.
Gary Kreps, age 41, is Vice President of the Fund. Mr. Kreps has
been Vice President, Chief Investment Officer -- Global Fixed
Income and a Director of G.T. Capital since 1992. Prior to
joining G.T. Capital, Mr. Kreps was Senior Vice President of the
Putnam Companies from 1988 to 1992.
James R. Tufts, age 37, is Vice President, Treasurer and Chief
Financial Officer of the Fund. Mr. Tufts has been Senior Vice
President -- Finance of G.T. Capital, G.T. Global Financial
Services, Inc. and G.T. Services since 1994. Prior thereto, Mr.
Tufts was Vice President -- Finance of G.T. Capital and G.T.
Services since 1990; and a Director of G.T. Capital, G.T. Global
and G.T. Services since 1991.
Kenneth R. Chancey, age 50, is Vice President and Chief
Accounting Officer of the Fund. Mr. Chancey
_______________________________________________________. Mr.
Chancey was Vice President of Putnam Fiduciary Trust Company from
1989 to 1992 and Assistant Vice President of Fidelity Service Co.
prior thereto.
Peter R. Guarino, age 37, is Assistant Secretary of the Fund.
Mr. Guarino__________________________________________________.
From 1989 to 1991, Mr. Guarino was an attorney at The Dreyfus
Corporation.
David J. Thelander, age 40, is Assistant Secretary to the Fund.
Mr. Thelander has been an Assistant General Counsel to G.T.
Capital since January 1995. Mr. Thelander was an associate at
the law firm of Kirkpatrick & Lockhart LLP from 1993 to 1994.
- 29 -
<PAGE>
Prior thereto, he was an attorney with the U.S. Securities and
Exchange Commission.
Administrator of the Fund
Princeton Administrators, L.P. ("Princeton") administers the
Fund's business and regulatory affairs subject to the supervision of the
Board of Trustees. Princeton is an affiliate of Merrill Lynch, Pierce,
Fenner & Smith, Inc. Its principal address is 800 Scudders Mill Road,
Plainsboro, New Jersey 08536.
Independent Public Accountants
The firm of Coopers & Lybrand L.L.P. presently serves as the
Fund's independent accountants to audit the books and accounts of the Fund
for the year ending October 31, 1995, and to include its opinion in
financial statements filed with the SEC. Representatives of Coopers &
Lybrand L.L.P. are not expected to be present at the Meeting, but have
been given the opportunity to make a statement if they so desire and will
be available should any matter arise requiring their presence.
Shareholder Proposals
The Meeting is a special meeting of Shareholders. Any
Shareholder who wishes to submit a proposal for consideration at the
Fund's next annual shareholder meeting should submit such proposal to the
Fund no later than _______ __, 1996. Shareholder proposals that are
submitted in a timely manner will not necessarily be included in the
Fund's proxy materials. Inclusion of such proposals are subject to
limitation under the federal securities laws.
Solicitation of Proxies
The Fund will request broker/dealer firms, custodians, nominees
and fiduciaries to forward proxy material to the beneficial owners of the
shares held of record by such persons. The Fund may reimburse such
broker/dealer firms, custodians, nominees and fiduciaries for their
reasonable expenses incurred in connection with such proxy solicitation.
In addition to the solicitation of Proxies by mail, officers of the Fund
and employees of G.T. Capital, without additional compensation, may
solicit Proxies in person or by telephone. The costs associated with such
solicitation and the Meeting will be borne by the Fund.
The Fund has retained __________, a professional proxy
solicitation firm, to assist in the solicitation of proxies. If the Fund
does not receive your proxy within the next month, you may receive a
telephone call from this firm requesting you to vote. The Fund estimates
that __________ will be paid fees of approximately $_____ in connection
with the solicitation.
Appraisal Rights
- 30 -
<PAGE>
Pursuant to Massachusetts law, shareholders of the Fund will not
be entitled to any rights of appraisal with respect to the matters
described in this Proxy Statement.
Other Matters to Come Before the Meeting
The Fund's Board of Trustees does not know of any matters to be
presented at the Meeting other than those described in this Proxy
Statement. If other business should properly come before the Meeting, the
persons named as proxies will vote thereon in accordance with their best
judgment.
Reports to Shareholders
The Annual Report of the Fund for its fiscal year ended October
31, 1994, which includes the Fund's audited financial statements, and its
unaudited Semi-Annual Report for the period ended April 30, 1995,
previously have been mailed to the Fund's shareholders. The Fund will
furnish to Shareholders, without charge, a copy of the Annual Report and a
copy of the Semi-Annual Report on request. Requests for such Reports may
be made by writing to the Fund at 50 California Street, 27th Floor, San
Francisco, California 94111, or by calling 800-824-1580.
IN ORDER THAT THE PRESENCE OF A QUORUM AT THE MEETING MAY BE
ASSURED, PROMPT EXECUTION AND RETURN OF THE ENCLOSED PROXY IS REQUESTED.
A SELF-ADDRESSED, POSTAGE-PAID ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
By Order of the Board of Trustees
HELGE KRIST LEE
Secretary
[DATE]
- 31 -
<PAGE>
APPENDIX A
SPECIAL RISK CONSIDERATIONS
Investment in Eastern European Issuers
Investment in issuers located in Eastern Europe (except Germany)
involves risks that may differ in kind or degree from risks normally
associated with investment in issuers located elsewhere in Europe,
including the following:
Securities Markets. The securities markets of Eastern European
countries, to the extent they exist, have substantially less trading
volume than the securities markets of the United States, Japan and many
countries elsewhere in Europe. Further, securities of Eastern European
country issuers are generally less liquid and more volatile than
securities of comparable issuers elsewhere in Europe. Accordingly, these
securities markets may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities or by large dispositions than is the case elsewhere
in Europe. The limited liquidity of some of these markets may affect the
Fund's ability to acquire or dispose of securities at a price and time
that it wishes to do so. In the securities markets of most Eastern
European countries, a few large companies account for a substantial
portion of such markets' total capitalization. A substantial number of
securities transactions in Eastern European countries are privately
negotiated outside of stock exchanges and over-the-counter markets. The
risks associated with investing in securities of Eastern European
countries generally may be heightened in the case of investments in
smaller securities markets.
Political Risks. Historically, many, though not all, of the
Eastern European countries in which the Fund expects to invest have been
governed by totalitarian communist governments with single-party systems.
Many of the countries involved have moved, or sought to move, toward
pluralistic, multi-party political systems with democratically elected
governments. In some instances, however, the shift has not been fully
effected or has been accompanied by social unrest and violence which has
varied in intensity and duration depending on the country involved. In
G.T. Capital's judgment, the current political situation in certain
Eastern European countries is unstable and, in others, anarchistic. G.T.
Capital believes that long-term political stability is a critical
prerequisite to the development of stable market economies and
institutions for the protection of private investment and ownership and,
accordingly, opportunities for capital appreciation. There can be no
assurance that Eastern European countries will not experience political
instability in the future which could adversely affect the market values
of the Fund's portfolio securities and of the Fund's Shares. Moreover,
there can be no assurance that any country in which the Fund invests will
not adopt policies adversely affecting the Fund's investments. There can
be no assurance that any investments that the Fund might make in such
emerging countries would not be expropriated, nationalized or otherwise
confiscated, through taxation or otherwise, at some time in the future.
In such an event, the Fund could lose its entire investment in the market
- 32 -
<PAGE>
involved. Moreover, changes in the leadership or policies of such markets
could halt the expansion or reverse the liberalization of foreign
investment policies now occurring in certain of these markets and
adversely affect existing investment opportunities.
Economic Considerations. Many Eastern European countries have
experienced or are experiencing recessionary conditions, high unemployment
or hyper-inflation, and the danger of such conditions developing appears
extant in others. While such conditions could directly affect the market
value for the Fund's portfolio securities and the market value of its
Shares, there is also the risk that these conditions could result in
political and social dislocations which could have similar adverse
effects, either directly or indirectly, as described in the preceding
paragraph.
The economies of particular Eastern European countries may differ
unfavorably from elsewhere in Europe in such respects as growth of Gross
Domestic Product ("GDP"), rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Further, the
economies of Eastern European countries generally are heavily dependent
upon international trade and, accordingly, have been and may continue to
be adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures
imposed or negotiated by the countries with which they trade. Business
entities in some Eastern European countries do not have any recent history
of operating in a market-oriented economy, and the ultimate impact of such
Eastern European countries' attempts to move toward more market-oriented
economies is currently unclear. Many Eastern European countries may be
characterized by an absence of developed legal structures governing
private and foreign investments and private property. The foregoing
circumstances may also exacerbate the adverse economic conditions
described above and thereby inhibit recoveries.
Foreign Investment and Repatriation Restrictions; Exchange
Controls. Some Eastern European countries prohibit certain kinds of
investment or impose substantial restrictions on investments in their
capital markets, particularly their equity markets, by foreign entities
such as the Fund. Some Eastern European countries require governmental
registration or approval for the repatriation of investment income,
capital or the proceeds of sales of securities by foreign investors. In
addition, if there is a deterioration in a country's balance of payments
or for other reasons, a country may impose restrictions on foreign capital
remittances abroad. The Fund could be adversely affected by delays in, or
a refusal to grant, any required governmental approval for repatriation of
capital, as well as by the application to the Fund of any restrictions on
investments or by withholding taxes imposed by Eastern European countries
on interest or dividends paid on securities held by the Fund or gains from
the disposition of such securities. If for any reason the Fund were
unable, through borrowing or otherwise, to distribute an amount equal to
substantially all of its investment company taxable income (as defined for
U.S. tax purposes) within applicable time periods, the Fund would cease to
qualify for the favorable tax treatment afforded to regulated investment
companies under the Internal Revenue Code of 1986, as amended.
- 33 -
<PAGE>
In Eastern European countries that currently restrict direct
foreign investment in the securities of companies listed and traded on the
stock exchanges in these countries, indirect foreign investment may still
be possible through investment funds which have been specially authorized.
The Fund may invest in these investment funds subject to the provisions of
the 1940 Act. However, if the Fund invests in such investment funds, the
Fund's stockholders may bear not only their proportionate share of the
expenses of the Fund (including operating expenses and the fees of the
Fund's investment manager), but may also bear indirectly similar expenses
of the underlying investment funds.
Regulatory Oversight and Corporate Disclosure Standards. There
may be a lower level of monitoring and regulation of the activities of
investors and issuers in many Eastern European markets than elsewhere in
Europe, and enforcement of existing regulations may be limited. Eastern
European issuers of securities in which the Fund may invest are not
subject to the same degree of regulation as are issuers elsewhere in
Europe with respect to such matters as insider trading rules, restrictions
on market manipulation, shareholder proxy requirements and timely
disclosure of information. Consequently, prices which the Fund pays for
investment securities may be affected by trading on material non-public
information, market manipulation and similar activities. The financial
disclosure, accounting and auditing standards of Eastern European
countries may differ from standards of other European countries in
important respects and less information may be available to investors in
issuers located in Eastern Europe than elsewhere in Europe.
Transaction Costs. Transaction costs, including brokerage
commissions for transactions both on and off the securities exchanges, are
generally higher in Eastern European countries than elsewhere in Europe.
Custody and Settlement Mechanisms. The stock markets in some
Eastern European countries have settlement mechanisms that are less
developed and reliable and more costly than those in more mature
economies. Some Eastern European countries markets use physical share
delivery settlement procedures. In such circumstances there may be share
registration and delivery delays. In addition, securities traded in
certain Eastern European countries may be subject to risks due to the
inexperience of financial intermediaries, the lack of modern technology,
the lack of a sufficient capital base to expand business operations and
the possibility of permanent or temporary termination of trading and
greater spreads between bid and asked prices for securities in such
markets. While the Fund will not invest in a market unless adequate
custodial arrangements are available, there is no assurance that
settlement delays or difficulties will not occur. In addition, the
governments of certain Eastern European countries and the former Soviet
Union may require that a governmental or quasi-governmental authority act
as custodian of the Fund's assets invested in such countries. These
authorities may not be qualified to act as foreign custodians under the
1940 Act and, as a result, the Fund would not be able to invest in these
countries in the absence of exemptive relief from the Commission. In
addition, the risk of loss through governmental confiscation may be
increased in such countries.
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<PAGE>
Currency Considerations. Because substantially all of the Fund's
assets may be invested in securities quoted or denominated in currencies
other than the U.S. Dollar (and revenues may be received in such
currencies), the U.S. Dollar equivalent of the Fund's net assets and
distributions will be adversely affected by reductions in the value of
these currencies relative to U.S. Dollar. Such changes will also affect
the Fund's income. If the value of the currencies in which the Fund
receives its income falls relative to the U.S. Dollar between receipt of
the income and the making of Fund distributions, the Fund may be required
to liquidate securities in order to make distributions if the Fund has
insufficient cash in U.S. Dollars to meet distribution requirements.
Similarly, if an exchange rate declines between the time the Fund incurs
expenses in U.S. Dollars and the time cash expenses are paid, the amount
of the currency required to be converted into U.S. Dollars in order to pay
expenses in U.S. Dollars could be greater than the equivalent amount of
such expenses in the currency at the time they were incurred.
The Fund anticipates that in general the foreign currencies
received by it with respect to most of its Eastern European country
investments will be freely convertible into U.S. Dollars on foreign
exchange markets and that the U.S. Dollars received will be fully
repatriable out of most of the various Eastern European countries in which
the Fund invests. However, there can be no assurance that Eastern
European countries will not impose restrictions in the future on the
movement of U.S. Dollars or these foreign currencies across local borders
or the convertibility of such foreign currencies into U.S. Dollars and
therefore with the payment of any distributions the Fund may make to its
stockholders. The currencies of some Eastern European countries may not
be freely convertible into other currencies and may not be internationally
traded.
Hedging Strategies. In general, instruments to hedge many of the
securities in which the Fund expects to invest, as well as the currencies
in which they are quoted or denominated, are not available. Accordingly,
the Fund fully expects to be substantially exposed to the risks outlined
above at least in the near term. Should appropriate instruments become
available, however, the Fund's hedging strategies and use of options
strategies entail risk and may not successfully or completely hedge the
risk intended to be hedged or otherwise achieve the result derived.
Investments in Illiquid Securities
If Proposal No. 1 is approved, the Board expects to revise the
Fund's investment policies to permit investment without limitation in
illiquid securities. Such securities may include securities in smaller,
less seasoned companies that may not be public. Investment in smaller
companies involves greater risk than is customarily associated with the
securities of more established companies. The securities of smaller
companies may have relatively limited marketability and may be subject to
more abrupt or erratic market movements than securities of larger
companies or broad market indices. Such securities are unlike securities
which are traded in a liquid market and which can be expected to be sold
immediately if the market is adequate. The Fund may have difficulty
disposing of illiquid securities because they may have a thin trading
market. There may be no established retail secondary market for these
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<PAGE>
securities, and such securities may be able to be sold only to a limited
number of dealers or institutional investors. The lack of a liquid
secondary market also may have an adverse impact on market prices of such
securities and may make it more difficult for the Fund to obtain accurate
market quotations for purposes of valuing the Fund's portfolio.
Less public information may be available with respect to the
issuers of illiquid securities than with respect to companies whose
securities are actively traded. Such securities may be issued by small
businesses with less management depth and may be subject to greater
economic, business and market risks than the liquid securities of more
well-established companies. Adverse conditions in the public securities
markets may at certain times preclude a public offering of an issuer's
securities.
Investments in Lower-Grade Debt Securities
If Proposal No. 1 is approved, the Board expects to revise the
Fund's investment policies to permit investment without limitation in
lower-grade debt securities, including securities having the lowest
ratings assigned by nationally recognized statistical ratings
organizations or no rating but judged by G.T. Capital to be of comparable
quality. Such investments involve a high degree of risk and are
predominantly speculative.
Debt issued by issuers (including government issuers) located in
Eastern Europe generally is deemed to be the equivalent in terms of
quality to securities rated below investment grade by Moody's and S&P.
Such securities are regarded as predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal in accordance
with the terms of the obligations and involve major risk exposure to
adverse conditions. Some of such securities, with respect to which the
issuer currently may not be paying interest or may be in payment default,
may be comparable to securities rated D by S&P or C by Moody's. The Fund
may have difficulty disposing of and valuing certain debt obligations
because there may be a limited trading market for such securities.
Because there is no liquid secondary market for many of these securities,
the Fund anticipates that such securities could be sold only to a limited
number of dealers or institutional investors.
The market values of lower grade debt securities tend to reflect
individual developments of the issuer to a greater extent than do higher
quality securities, which react primarily to fluctuations in the general
level of interest rates. In addition, lower grade debt securities tend to
be more sensitive to economic conditions and generally have more volatile
prices than higher quality securities. Issuers of lower grade debt
securities are often highly leveraged and may not have available to them
more traditional methods of financing. For example, during an economic
downturn or a sustained period of rising interest rates, highly leveraged
issuers of lower quality securities may experience financial stress.
During such periods, such issuers may not have sufficient revenues to meet
their interest payment obligations. The issuer's ability to service its
debt obligations may also be adversely affected by specific developments
affecting the issuer, such as the issuer's inability to meet specific
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<PAGE>
projected business forecasts or the unavailability of additional
financing. Similarly, certain governments that issue lower grade debt
securities are among the largest debtors to commercial banks, foreign
governments and supranational organizations such as the World Bank and may
not be able or willing to make principal and/or interest repayments as
they come due. The risk of loss due to default by the issuer is
significantly greater for the holders of lower grade securities because
such securities are generally unsecured and are often subordinated to
other creditors of the issuer.
Lower grade debt securities frequently have call or buy-back
features which would permit an issuer to call or repurchase the security
from the Fund. If an issuer exercises these provisions in a declining
interest rate market, the Fund may have to replace the security with a
lower yielding security, resulting in a decreased return for investors.
In addition, the Fund may have difficulty disposing of lower grade debt
securities because they may have a thin trading market. There may be no
established retail secondary market for many of these securities, and the
Fund anticipates that such securities could be sold only to a limited
number of dealers or institutional investors. The lack of a liquid
secondary market also may have an adverse impact on market prices of such
instruments and may make it more difficult for the Fund to obtain accurate
market quotations for purposes of valuing the Fund's portfolio. The Fund
may also acquire lower grade debt securities sold during an initial
underwriting or which are sold without registration under applicable
securities laws. Such securities involve special considerations and
risks. Other factors that could have an adverse effect on the market
value of lower grade debt securities in which the Fund may invest include:
(i) potential adverse publicity; (ii) heightened sensitivity to general
economic or political conditions; and (iii) the likely adverse impact of a
major economic recession.
The Fund may also incur additional expenses to the extent it is
required to seek recovery upon a default in the payment of principal or
interest on its portfolio holdings. The Fund may have limited legal
recourse in the event of a default.
Investments in debt securities of Eastern European governments
involve special risks. The issuer of the debt or the governmental
authorities that control the repayment of the debt may be unable or
unwilling to repay principal or interest when due in accordance with the
terms of such debt. Periods of economic uncertainty may result in the
volatility of market prices of such debt and, in turn, of the Fund's net
asset value. A government's ability or unwillingness to repay principal
and pay interest in a timely manner may be affected by, among other
factors, its cash flow situation, the extent of its foreign reserves, the
availability of sufficient foreign exchange on the date a payment is due,
the relative size of the debt service burden to the economy as a whole,
the government's policy toward principal international lenders and the
political constraints to which a government may be subject. Political
changes or a deterioration of a country's domestic economy or balance of
trade may also affect the willingness of countries to service their debt.
Eastern European governments may default on their debt. Such debtors also
may be dependent on expected disbursements from foreign governments,
multilateral agencies and other entities abroad to reduce principal and
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<PAGE>
interest arrearages on their debt. The commitment on the part of these
governments, agencies and others to make such disbursements may be
conditioned on the debtor's implementation of economic reforms and/or
economic performance and the timely service of such debtor's obligations.
Failure to implement such reforms, achieve such levels of economic
performance or repay principal or interest when due, may result in the
cancellation of such third parties' commitments to lend funds to the
government debtor, which may further impair such debtor's ability or
willingness to timely service its debts.
The occurrence of political, social or diplomatic changes in one
or more of the countries issuing debt could adversely affect the Fund's
investments. Eastern European markets are faced with social and political
issues and some have experienced high rates of inflation in recent years
and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance
governmental programs, and may have other adverse social, political and
economic consequences. Political changes or a deterioration of a
country's domestic economy or balance of trade may affect the willingness
of countries to service their debt.
The ability of Eastern European governments to make timely
payments on their debt is likely to be influenced strongly by a country's
balance of trade and its access to trade and other international credits.
A country whose exports are concentrated in a few commodities could be
vulnerable to a decline in the international prices of one or more of such
commodities. Increased protectionism on the part of a country's trading
partners could also adversely affect its exports. Such events could
diminish a country's trade account surplus, if any. To the extent that a
country receives payment for its exports in currencies other than hard
currencies, its ability to make hard currency payments could be affected.
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<PAGE>
PROXY CARD -- FRONT
Please indicate your vote by filling in the appropriate boxes below.
The Board of Trustees recommends a vote "FOR" Proposal 1
and "FOR" the two nominees for the Board of Trustees.
1/2. REORGANIZATION OF FUND. Each share may be voted for one of the
following:
___ FOR Proposal 1 to approve an Amended and Restated
Agreement and Declaration of Trust, reflecting (i) a
change of the Fund's name to "G.T. Global Eastern Europe
Fund," and (ii) conversion of the Fund to "interval"
status;
or
--
___ FOR Proposal 2 to convert the Fund to an open-end
investment company;
or
--
___ AGAINST both Proposal 1 and Proposal 2;
or
--
___ ABSTAIN with respect to both Proposal 1 and Proposal 2.
3. ELECTION OF TRUSTEES. Each share may be voted for one of the
following:
___ FOR all nominees listed below (except as marked to the
contrary below);
or
--
___ WITHHOLD AUTHORITY to vote for all nominees listed below
(Instruction: To withhold authority to vote for any individual
nominee write that nominee's name in the space
provided) __________________________________________
Arthur C. Patterson
Ruth H. Quigley
4. OTHER BUSINESS. Each share may be voted for one of the
following:
___ AUTHORIZE proxies to vote on other business, if any, in
accordance with their best judgement;
or
--
___ WITHHOLD AUTHORITY for proxies to vote on such other
business, if any.
PLEASE SIGN AND DATE THE REVERSE SIDE OF THIS CARD
<PAGE>
PROXY CARD -- REVERSE
G.T. GREATER EUROPE FUND
Special Meeting of Shareholders - December 13, 1995
The undersigned hereby appoints as proxies [ ] and [ ] and each of
them (with power of substitution) to vote for the undersigned all shares
of beneficial interest of the undersigned at the aforesaid meeting and any
adjournment thereof with all power the undersigned would have if
personally present. The shares represented by this proxy will be voted as
instructed. UNLESS INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED
TO GRANT AUTHORITY TO VOTE "FOR" PROPOSAL 1, "FOR" ALL NOMINEES FOR THE
BOARD OF TRUSTEES LISTED IN PROPOSAL 3 AND TO AUTHORIZE PROPOSAL 4. THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF G.T. GREATER
EUROPE FUND.
YOUR VOTE IS IMPORTANT
Please sign and date this proxy and return it in the enclosed envelope to
[proxy solicitation agent] [G.T. Greater Europe Fund, 50 California
Street, 27th Floor, San Francisco, CA 94111]. The proxy will not be
voted unless dated and signed exactly as instructed below.
If shares are held jointly, each Shareholder
named should sign. If only one signs, his or her
signature will be binding. If the Shareholder is
a corporation, the President or a Vice President
should sign in his or her own name, indicating
title. If the Shareholder is a partnership, a
partner should sign in his or her own name,
indicating that he or she is a "Partner."
Sign exactly as name appears hereon.
______________________________
Signature
______________________________
Signature if held jointly
Dated __________________, 1995
<PAGE>
